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  • 4m.

    Parent PLUS Loans: Before You Borrow

    Parent PLUS loans are federal student loans for parents with good credit. They can borrow these loans to help their children bridge the gap between their financial aid award and their cost of attendance.
    Updated: July 5, 2018

    What You'll Learn

    • What it takes to qualify for Parent PLUS loans.
    • The current interest rates on these loans.
    • Why it's smart to start repaying them while you're in school.
    A woman reading a book in the library

    The Highlights

    Who can borrow these loans?

    Parents of dependent undergraduate students

    How much can I borrow?

    No annual or total limit

    What's the current interest rate?


    Is my parent responsible for paying the interest?


    Dig Into The Details

    Who Can Borrow These Loans?

    Natural, adoptive, legal guardians, and stepparents (including same-sex stepparents) of dependent undergraduate students are eligible to borrow these loans. The borrower must have good credit, and the dependent undergraduate student whose education they borrow for must be:

    • A U.S. citizen or eligible non-citizen.
    • Enrolled at least half time at an eligible institution.

    If you are denied due to poor credit, you can enlist a family member or friend with good credit to co-sign. You can also appeal the decision if you can document extenuating circumstances.

    How Much Can I Borrow?

    There's no annual or total borrowing limit—you just can't borrow more than the cost of attendance at your child's school, minus all of the other aid he or she has received. Also, if you are denied for a Parent PLUS loan, your child may qualify for addition unsubsidized Stafford loans.

    Your child does not need to show financial need to qualify for a Parent PLUS loan, but he or she will need to complete the Free Application for Federal Student Aid (FAFSA) to apply.

    What's The Current Interest Rate?

    All Direct Parent PLUS loans made between July 1, 2018, and June 30, 2019, have an interest rate of 7.60%.

    For Direct Parent PLUS loans made between July 1, 2017, and June 30, 2018, the interest rate is 7%. For Direct Parent PLUS loans made between July 1, 2010, and June 30, 2013, the interest rate is 7.9%. For Direct Parent PLUS loans made between July 1, 2013, and June 30, 2014, the interest rate is 6.41%. Direct Parent PLUS loans made between July 1, 2014, and June 30, 2015, have an interest rate of 7.21%. Direct Parent PLUS loans made between July 1, 2015, and June 30, 2016, have an interest rate of 6.84%. And Direct Parent PLUS loans made between July 1, 2016, and June 30, 2017, have an interest rate of 6.31%. In addition, FFELP Parent PLUS loans made between July 1, 2006, and June 30, 2010, have an interest rate of 8.5%.

    Who Is Responsible For Paying The Interest?

    Parent PLUS loans are not subsidized, and the loan is in the parent's name. That means the parent will be responsible for any interest that accrues over the entire lifetime of the loan.

    Interest begins accruing on these loans when they are disbursed. You may postpone payments with an in-school deferment while your child is enrolled at least half time; however, interest will continue adding up on these loans during this time. When your loans enter repayment, the interest capitalizes (gets added to their principal balance)—so you will have to pay interest on the capitalized amount as well as the initial loan balance.

    You can make monthly or quarterly interest payments on these loans. By doing so while your child is still in school, you can prevent or reduce the capitalization.

    Whose Loan Is It, Anyway?

    Many families who use Parent PLUS loans decide that the student will take over the payments from the parent after graduation. Just remember that a Parent PLUS loan will always be in the parent's name. It can't be transferred into anyone else's name at any point. This means that you will always be responsible for the payments, even if your child willingly makes them on your behalf.

    If you fall behind on payments—or even worse, if the loan goes into default—it will affect your credit, not your child's. Also, any lower payment or postponement options will be based on your circumstances—even if your child is the one making the payments.

    If you have such an agreement with your son or daughter, make sure that he or she can afford to make these payments on time. After all, you don't want them to thank you for helping pay for their education by contributing a default on your credit report.

    Be Money Smart

    Here's a little more info about how much you could save by making interest-only payments while your child is in school.

    Let's say you borrowed a $20,000 Parent PLUS loan with a 7.60% interest rate. After your child has been in school for 2 years, about $3,040 worth of interest would be added to the debt, making the new balance $23,040 when it enters repayment.

    If you paid that amount off using the standard 10-year, 120-payment plan, the $20,000 loan ends up costing about $32,983. But, if you pay the interest while your child is in school, the total bill after 10 years would be over $4,350 lower!

    Want to learn more about repaying Parent PLUS loans? Check out this article.

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